Eritrea looks set to be designated the world's newest "rogue state" as the list of Bush administration grievances against the tiny Horn of Africa country lengthens. But growing US pressure may succeed only in fuelling and conflating barely contained regional conflicts, including Somalia's civil war, separatist strife in the Ogaden and the long-running Eritrea-Ethiopia border dispute.

Jendayi Frazer, the US assistant secretary of state for Africa, complained during a visit to Addis Ababa this month that Eritrea's capital, Asmara, was becoming a safe haven for Islamist terrorists from across east Africa. Ms Frazer took particular exception to a recent conference there of Somali opposition groups including Sheikh Hassan Dahir Aweys, the leader of the Somali Council of Islamic Courts movement that was forced from power last winter by invading Ethiopian troops.

"The fact is, Eritrea is providing sanctuary to terrorists," Ms Frazer said. "Aweys is designated by the US and UN security council for his association with al-Qaida. He's attending the conference in Asmara that's supported by the government, so the linkage is quite significant."

US displeasure also arises from its conviction, backed by a UN report in July, that Eritrea is arming Islamist insurgents fighting the transitional federal administration (TFG) in Mogadishu, promoted by the US and Britain as Somalia's sole legitimate government. Washington also suspects Eritrea and Islamist groups of assisting separatists in pro-western Ethiopia's Somali state, in the eastern Ogaden region bordering Somalia.

"We're worried by a whole range of Eritrean behaviours," a US diplomatic source said. "We're worried they could use their influence with the rebel groups to undermine the Darfur talks due in Tripoli next month. We're concerned about their troop deployments on the [Ethiopian] border and the collapse of the Hague talks [on resolving the demarcation dispute]."

Resulting bilateral tensions had led to restrictions on the movement of US embassy officials in Asmara and the closure of Eritrea's consulate in Oakland, California, an important conduit for remittances from Eritrean nationals working in the US, the source said.

Ms Frazer warned on September 9 that the US was considering adding Eritrea to its list of countries that sponsor international terrorism, thereby automatically triggering sanctions. A decision is expected soon unless the Asmara government changes tack.

Concerns about the deteriorating situation in Somalia and eastern Ethiopia are not confined to Washington. Western attempts to bolster African Union and Gulf Arab political and financial support for Mogadishu's transitional government have failed to stop a significant regrouping of opposition forces or to secure the 8,000-strong peacekeeping force promised earlier this year. Ethiopia's unpopular military presence has meanwhile continued amid daily violence.

"Somalia's national reconciliation conference, sponsored by the TFG and which ended on August 30, failed to produce substantive and enforceable agreements," an analysis by the independent Power & Interest News Report concluded. At the same time, the Asmara opposition conference had agreed only on "the single aim of removing Ethiopian occupying forces". In other respects, pro- and anti-government forces remained internally divided and mutually antagonistic, it said.

A UN report on the Ogaden published this week warns meanwhile that "humanitarian conditions within the conflict areas have deteriorated substantially over the past several months." The UN pointed to medical and food shortages arising from the Ethiopian army's recent operations against Ogaden National Liberation Front separatists. The Ethiopian government said "prompt" remedial action would be taken.

Given this unstable context, Eritrea's claim that it is being made a scapegoat for complex regional problems does not appear wholly unreasonable. From Asmara's perspective, it is the victim of Washington's blinkered "war on terror" alliance with Ethiopia, the old enemy from which it broke away in 1993 and fought a subsequent war. Even some US officials privately admit that counter-terrorism objectives may be distorting Washington's outlook.

"It's ridiculous. We have fought terrorists long before September 11," Eritrea's information minister, Ali Abdu, said in response to the American claims. "We don't live on their handouts ... They always say might is right but we say right is might."

Eritrea says it wants good relations with the US but will not be pushed around. For a country of 5 million confronting a giant neighbour of 80 million, plus the world's sole superpower, such bravado is either famous last words - or the harbinger of even bigger problems for the US in the Horn of Africa.